ASIC’s wrap on financial baddies

Insider trading and market manipulation are just a couple of the enforcements explored in ASIC’s seventh report on the supervision of Australian financial markets.

The report highlights the volume of market and participant-related outcomes achieved by ASIC from July to December 2013.

While there are no ground breaking differences in the statistics between this report and the last two, there is a definite upwards trend across most sections in the number of matters ASIC has been involved with.

In the report period, there were 19,255 trading alerts, with 102 matters requiring further consideration, and 31 subsequent referrals to enforcement.

ASIC also highlighted that insider trading has been a strong focus, and there were 14 matters put forward for further investigation, up from eight in the last report.

As a result, there were seven enforcement outcomes for insider trading offences.

These included:

John Kay Jin Khoo, a former banking associate at the Royal Bank of Canada, who was sentenced to a minimum of 14 months in jail.

Jonathon Jin Yi Ang, a former analyst for finance company Lincoln Crown and Company, who was sentenced to a two year good behaviour bond.

Former Gunns chairman John Gay, who was fined $50,000.

The report also showed that one individual and one company were penalised for market manipulation.

Thai Quoc Tang was sentenced to two years in prison after he created a false or misleading appearance in the market when trading in the shares of biological technology company Tissue Therapies.

ASIC also accepted an enforceable undertaking (EU) from the National Australia Bank (NAB) following an investigation into the 18 October 2012 share price spike of the ASX 200. The EU related to the bank’s responsibility for potential market misconduct undertaken by the trading personal of a contractor, which led to the spike.

In response, NAB agreed to adopt specific monitoring and control systems for direct market access trading, and make a voluntary $2 million contribution to financial literacy projects in Australia.

Seven infringement notices were handed out by the Markets Disciplinary Panel (MDP), up from just two last year, with the most costly being a $175,000 penalty for Macquarie Bank.

The bank paid the penalty to comply with the MDP infringement notice that alleged it had contravened the Corporations Act for failing, on two separate occasions, to deposit monies received from a client into client accounts maintained by Macquarie Bank.

ASIC commissioner Cathie Armour said the results highlighted in the report were testament to the significant energy ASIC dedicated to the supervision and surveillance of Australia’s financial markets.

“These results are crucial to the further strengthening of investor confidence in the integrity of our markets,” she said.

Greg Yanco, ASIC’s senior executive leader of the market and participant supervision team, said ASIC’s new market surveillance system has allowed it to better detect and investigate trading breaches.

“Our analysts can now use the system to develop and modify alerts that take into account changing market circumstances, as well as calibrating alerts more dynamically,” he said.

Greg Medcraft (ASIC Chair) was interviewed on The Business last week about the penalty system that ASIC have to play with. You could see him gritting his teeth in frustrating about how weak the "maximum penalties" are. ...At the moment it seems that if you steal $100k and get caught, your "punishment" is to repay the $100k. By that logic (and the fact that ASIC don't always catch the crooks) financial fraud seems like a perfectly rational career choice.

ASIC need more powers to prosecute; we need to weed out the crooks and punish them. We need to put the message out to anyone who wants to flout the law that they will be punished.

This might enable ASIC (and public policy) to have a bit more faith in our abilities, and to free us from some of the BS compliance/red tape that we have to deal with....ultimately this would allow the 99.9% of us who do the right thing (always have the best intention) to get on with our job.